(BERR) Royal mail - The case for Partnership

The Government today reinforced its message that a strategic partnership can, and will, help to deliver a transformed Royal Mail and that proceeds from the proposed transaction will be used to fund modernisation, as it published its response to the Business and Enterprise Select Committee's report on the Postal Services Bill.

Postal Services Minister Pat McFadden said:

"The measures the Government proposes can deliver our objectives, which are to put a publicly owned Royal Mail on a clear path to modernisation and, in so doing, to secure the future of the universal postal service which the Hooper report said was under threat.

"Royal Mail faces a stark choice about its future, to modernise or decline as mail volumes drop because of the shift to e-mail and text messaging. The Government has put forward proposals that offer Royal Mail the opportunity to survive in this new communications age, as well as respond to its customers' changing needs."

Government welcomed the Committee's support for the majority of the Government's analysis and proposals, including that the status quo is not an option; clear recognition that Royal Mail Group is 'significantly less efficient than its competitors'; both management and unions must change; and that the Government's proposed measures in respect of regulation and historic pensions' liabilities are important elements of a solution.

The Government rejected the Committee's view that it should put a precise figure on modernisation.

Mr McFadden said:

"Modernisation is not a one-off event, nor simply about the purchase of some new machines. It must be an ongoing process in a fast changing commercial environment. The cost of modernisation will depend on the business plan agreed with any partner, how far reforms are taken, the speed of implementation, and the extent to which the Royal Mail seeks to become a leader in the communications market.

"Given Royal Mail's falling revenues and limited profits over the next few years, and pensions fund deficit, clearly Royal Mail will not be able to fund this investment alone. Additional capital will be required and this could be hundreds of millions of pounds, in addition to the funding we have already provided. And as well as capital, there is a need to transform Royal Mail in order to preserve the universal service which is at the heart of our postal system."

The Government has made a number of moves to respond to some of the concerns raised by the Committee. This includes an amendment to impose a new duty on Post Office Ltd to provide an annual report on the Post Office network and its accessibility to consumers, particularly the most vulnerable, throughout the UK.

The Government understands that the Select Committee is keen to see more information about the commercial process. The Secretary of State has committed to keep Parliament informed about important developments as the partnership negotiations progress and to report to Parliament. A Government assessment of the alternatives to partnership will be published before the Commons stages of the Bill.